Brace for 2010 Budget Shortfall if You Underestimated Fee
It's Official: 14.1% USF Fee for Q1 2010 Posted on Dec. 14, 2009 The Universal Service Fund fee levied on your interstate and international calls will be a record high 14.1% for the first quarter of 2010, according to an FCC public notice released Dec. 11. That’s a double-digit increase from the current 12.3% fee. It’s a shock to telecom managers who anticipated a less aggressive increase when they constructed their 2010 budgets. The only thing that could stop the fee hike from becoming official is an FCC challenge before Dec. 25. But the clause establishing that safeguard is just boilerplate and it’s unlikely the FCC will act, meaning the 14.1% charge is all but guaranteed to show up on your bills next quarter, notes Andy Regitsky, president of Regitsky & Associates, a consulting firm in Reston, Va., that provides regulatory policy expertise.
Big Spenders Could Negotiate Fee Revise your 2010 budget now if the steep USF increase puts your original projection into shortfall. Or – if your budget has been locked in for months and can’t be revised – ready your explanation now for the hit to your budget. Increasing the fee to 14.1% from the current 12.3% adds an additional $900,000 in USF fees for an enterprise spending $50 million a year on interstate and international services, notes telecom attorney Colleen Boothby, a partner at Levine, Blaszak, Block & Boothby (LB3), in Washington, D.C. Don’t forget to include the fee increase into the USF charges you’re paying on audio conferencing services, too [VR 7/17/08]. One large online retailer projected a several-percent increase in USF when forecasting its 2010 budget, but didn’t anticipate such a steep hike in the first quarter. The USF fee actually is assessed on carrier revenues, but service providers pass the expense on to business and residential customers as a surcharge. There’s nothing legally stopping the carriers from removing the USF line item from your bills or discounting your services to offset USF charges, says LB3 partner Jim Blaszak. The same goes for other carrier “revenue enhancement” surcharges like the property tax allotment and administrative fees. But only the biggest accounts with substantial negotiating leverage wield enough bargaining power to make it happen, he notes. Smaller telecom shops have fewer options. Steve Tullgren, telecom manager at Vista, Calif.-based medical device manufacturer DJO, says he can’t disconnect any more services to cut expenses. A senior vice president already questioned the $4,000 USF charge on DJO’s last Qwest bill. Now the USF fee increase will cost his enterprise an additional $25,000 a year, Tullgren reports. That will certainly raise eyebrows among DJO’s executives. Tullgren had removed USF fees from his tracking reports but now plans to add the item back to the report so he can monitor the changes more closely. Fee Hike Could Energize Reform Efforts USF reform is the brightest hope many telecom managers have for relief from the skyrocketing charges. The fee increase “will ratchet up the pressure” on regulators to overhaul how the fees are assessed, collected and disbursed, says Billy Jack Gregg, former board member of both the Federal-State Joint Board on Universal Service and the Universal Service Administrative Company, the nonprofit that administers the USF. FCC Chairman Julius Genachowski said the FCC’s National Broadband Plan will include reforming the USF, according to his prepared remarks delivered at a conference in Washington, D.C., on Dec. 1. Genachowski also announced his intention to “reorient” the Universal Service Fund to support universal adoption of broadband in the United States. “USF is a multi-billion dollar annual fund that continues to support yesterday’s communications infrastructure,” Genachowski said. “The goal of universality is as important as ever – and to meet our country’s innovation goals, we need to reorient the fund to support broadband communications. “This is a thorny issue, with no shortage of practical and statutory challenges,” he continued. “We need to wring savings out of the system, protect consumers, avoid flashcuts, while ultimately moving USF in the direction it needs to go to support our 21st century platform for innovation.” Comments were due Dec. 7 on an FCC public notice issued Nov. 13 (DA 09-2419) that examines whether the USF is appropriately sized to support broadband rollout; whether subscribers should pay based on a percent of their bills or number of lines or a combination of both; and how to minimize waste, fraud and abuse. Congress is addressing the USF problem, too. The Universal Service Reform Act of 2009, to be introduced soon in the House of Representatives, aims to stabilize the growth of the Universal Service Fund and streamline its administration. If enacted, the bill would cap several segments of the fund, require most USF recipients to offer high-speed broadband within five years, establish a competitive bidding process for allocating funds to wireless carriers, broaden the number of service providers that must contribute to the fund and change the contribution method. The bill’s best chance of passage will be in 2011, Gregg, now principal of Billy Jack Gregg Universal Consulting, in Hurricane, W.V., told Voice Report for an earlier article. That’s because Congress is winding down its 2009 session and many members will be distracted by reelection campaigns in 2010. The fact that the USF fee is poised to skyrocket to 14.1% likely will add to the bill’s momentum. Previous USF reform bills never won passage, but Gregg argues that the current iteration is strong because “it’s the product of several years’ distillation.” The authors integrated the comments special interest groups made on earlier bills and might have struck a balance that will win broad support. (
USF Contribution Factors, 2003 to 2010
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